Bitcoin Is Real Money, Judge Rules in J.P. Morgan Hack

Bitcoin qualifies as money, a federal judge ruled Monday, in a decision linked to a criminal case over hacking attacks against J.P. Morgan Chase and other companies.

U.S. District Judge Alison Nathan in Manhattan rejected a bid by Anthony Murgio to dismiss two charges related to his alleged operation of Coin.mx, which prosecutors have called an unlicensed bitcoin exchange.

Murgio had argued that bitcoin did not qualify as “funds” under the federal law prohibiting the operation of unlicensed money transmitting businesses.

But the judge, like her colleague Jed Rakoff in an unrelated 2014 case, said the virtual currency met that definition.

“Bitcoins are funds within the plain meaning of that term,” Nathan wrote. “Bitcoins can be accepted as a payment for goods and services or bought directly from an exchange with a bank account. They therefore function as pecuniary resources and are used as a medium of exchange and a means of payment.”

The decision did not address six other criminal counts that Murgio faces, Nathan wrote.

Brian Klein, a lawyer for Murgio, said he disagreed with the decision.

“Anthony Murgio maintains his innocence and looks forward to clearing his name at his upcoming trial,” he added.

Prosecutors last year charged Murgio over the operation of Coin.mx, and in April charged his father, Michael, with participating in bribery aimed at supporting it.

Authorities have said Coin.mx was owned by Gery Shalon, an Israeli man who, along with two others, was charged with running a sprawling computer hacking and fraud scheme targeting a dozen companies, including J.P. Morgan jpm, and exposing personal data of more than 100 million people.

That alleged scheme generated hundreds of millions of dollars of profit through pumping up stock prices, online casinos, money laundering, and other illegal activity, prosecutors have said.

Shalon has pleaded not guilty, and is being held at the Metropolitan Correctional Center in Manhattan. He hired new lawyers last month and is seeking permission to replace lawyers who joined the case in June, a Monday court filing showed.

The case is U.S. v. Murgio et. al., U.S. District Court, Southern District of New York, No. 15-cr-00769.

Philippine Central Bank Bolsters Cyber Security

The Philippine central bank is bolstering cyber security surveillance to help boost banks’ defenses and is looking at regulating bitcoin operators to combat money laundering, a senior official said on Saturday.

More banks around the world have fallen victim to cyber attacks that involved the use of fraudulent SWIFT messages, the same technique at the heart of February’s massive theft from the Bangladesh central bank.

The Philippine central bank has set up a separate cyber security surveillance division to craft cyber security policies and conduct surveillance work, monitor cyber threats and test the ability of supervised institutions to manage cyber security issues, Nestor Espenilla central bank deputy governor in charge of banking supervision, said in a lecture organized by the bank.

For more on the Philippines, watch:

“We have a core IT supervision group … and within that group we created a new division that is focused on cyber security issues to strengthen our capacity to deal with these,” he said.

Policymakers were also looking at tightening regulations for remittance companies and money changers, and regulating operators of virtual currencies to boost efforts to combat money laundering, he said.

Users of digital currency bitcoin more than doubled in the Philippines in the first half of last year from a year earlier, Espenilla said, while bitcoin transactions purportedly passing through registered companies in the country range from $2 million to $3 million per month based on available estimates.

“That is what we are looking to do, whether it is now time to impose hard regulations for virtual currency operators. Right now, we look at them as akin to remittance companies,” Espenilla said.

The Philippine central bank revoked the license of Philrem Service Corporation, a remittance company that anti-money laundering investigators said was used to transfer some of the $81 million hackers looted from the Bangladesh central bank.

The Anti-Money Laundering Council issued a complaint against Philrem on April 28, accusing it of hiding the money trail via a web of transfers and currency conversions through Philippine bank accounts, before moving the cash through casinos in Manila and junket operators.

Global Regulators Now Eyeing Fintech

Global regulators may propose rules to prevent “fintech” innovations from destabilizing the broader financial system, the G20’s Financial Stability Board said on Saturday.

FSB Chairman Mark Carney said in a letter to central bankers and finance ministers from the Group of 20 economies meeting in Shanghai that assessing the systemic implications of fintech innovations would form part of the task force’s core policy work this year.

It marks the first time that regulators at the global level have begun scrutinising fintech, a sector that includes blockchain, the distributed ledger technology underpinning bitcoin that proponents say could radically change payments systems.

So far regulators have been treading carefully as countries such as Britain are wary of crimping a sector that is still tiny compared with banking, but could create many new jobs in future.

“The regulatory framework must ensure that it is able to manage any systemic risks that may arise from technological change without stifling innovation,” Carney said.

The FSB will discuss its findings in March and consider its next steps, he added.

The technology Reid Hoffman thinks will take over our financial future:

Carney, who is also Governor of the Bank of England, said the more difficult economic and financial conditions since the start of this year partly reflect weaker growth prospects.

Banking shares have come under pressure, reflecting concerns that lenders have to do more to adjust their long-term business models to a lower growth, lower nominal interest rate environment, Carney said.

Carney said the FSB will report in September on whether there has been a reduction in market liquidity and, if so, its extent, drivers and likely persistence.

Banks and central bankers have locked horns over why liquidity in secondary bond markets has thinned, with bankers blaming tougher regulation introduced by the FSB and others since the 2007-09 financial crisis.

Central bankers say much of the heavier liquidity in markets before the crisis was “illusory” with insufficient evidence so far to show that some of the new rules need rolling back.

ASSET MANAGERS IN SIGHT

Linked to the liquidity issue is a worry that asset managers could not cope with heavy redemptions, or investors pulling money out of bond funds en masse.

“We have prioritised work to analyse structural vulnerabilities in asset management activities and to identify risks that may merit policy responses in four areas,” Carney said.

The FSB, which sets global standards implemented by G20 member countries, will issue policy recommendations in September after looking at leverage in funds, and their operational risks and securities lending activities.

“An over-optimistic ‘liquidity illusion’ may have been reinforced by the growth of investment products offering redemptions at very short notice,” Carney said.

Policies to reduce “fire-sale” risks in open-ended investment funds may also help, he said.

Carney said IOSCO, which groups global securities markets regulators, will publish by December a “toolkit” of measures to promote proper conduct by individuals and firms in markets.

Global regulators will also consult on more detailed rules to prevent clearing houses, which stand between two sides of a derivatives trade, from becoming “too big to fail” due to their size and reach, Carney said.

Behind the “exodus” of bitcoin startups from New York

Last weekend the deadline to apply for a BitLicense came and went, and a slew of bitcoin startups went too—right out of New York State.

The BitLicense is New York’s regulatory badge of approval, required of all digital-currency businesses that are deemed “money transmitters” (companies that hold customer funds, most of them exchanges). And it has been highly controversial in bitcoin circles since it was first unveiled over year ago, after multiple revisions.

Bitcoin executives—even those who chose to apply for a license for their company—have gripes about the final set of rules, and are still hoping to see it change. This weekend, many of them decided to make a statement: rather than apply for the license, they left New York. For some with physical headquarters in the state, that meant literal moving trucks. For others it meant cutting off service to New York-based customers.

To leave New York entirely may seem like a drastic step, but much of the most fevered activity around trading of the digital currency is happening outside the U.S. anyway. The new defectors are all following ShapeShift, a startup led by outspoken bitcoin entrepreneur Erik Voorhees, which was the first to go, cutting off service to New York just days after the BitLicense came out.

Why are they upset?

Critics of the BitLicense see limitations in the specific rules, such as the requirement of new licenses for every new service offered. But the application process, too, has left some companies wringing their hands.

The application costs $5,000, which alone does not necessarily seem excessive. But executives say that the paperwork was extensive and required legal help, which carries additional fees. Jaron Lukasiewicz, CEO of Coinsetter, tells Fortune his company spent nearly $50,000 to apply for the BitLicense. George Frost, chief legal officer at Bitstamp, told Coindesk it was more like $100,000 for his company. If either of those figures is remotely accurate, that cost would certainly be prohibitive for smaller companies.

“You’d hope that the costs are outweighed by the value, but for some, maybe not,” says Lukasiewicz. He says that Coinsetter seriously considered not applying, but, “I definitely don’t need the legal risk.” Lukasiewicz is not a fan of the BitLicense, or of regulation in general for the space, but he says, “I don’t want to have to hide in New York. And I viewed it as something that could have marketing upside in terms of helping people feel safer using us.”

Those who leave and those who stay

This is not a comprehensive list, but here are some of the companies that packed up and left New York: Bitfinex, BitQuick, BTCGuild, Eobot, Genesis Mining, GoCoin, Kraken, LocalBitcoins, Paxful, and Poloniex.

Almost all of them published statements about their reasons for refusing to apply, and most of them read similarly. “This particular piece of legislation is unnecessary and is an obstacle to free market innovation,” wrote Genesis Mining on its blog. Kraken, an exchange headquartered in San Francisco, said that the license, “comes at a price that exceeds the market opportunity of servicing New York residents. Therefore, we have no option but to withdraw our service from the state.”

Even some digital currency companies that are not money-transmitters, and thus do not need to obtain a BitLicense, voiced their criticism of the regulations and support for companies that exited. Paul Puey, CEO of Airbitz, wrote, “Luckily at Airbitz, we aren’t affected… With all the companies announcing these restrictions today, it should remind the community of the importance to be, and to support, decentralization. Bitcoin was intended to give people true control and access to their money and every time we use a centralized service, we aren’t truly using Bitcoin.”

Bitcoin blogs like CoinFox and Coin Telegraph are calling this a “mass exodus” while New York Business Journal christens it “The Great Bitcoin Exodus.” But before the weight of these exits gets overstated, it is important to note that most of the hottest, best-funded bitcoin companies—for example, Coinbase, Circle, 21 Inc., and itBit—are staying. Of the companies that left New York this week, Bitfinex was the most significant and surprising.

Bitreserve, which is headquartered in South Carolina but has New York clients, is staying. CEO Anthony Watson, a former Nike CIO and alum of Fortune‘s 40 Under 40 list, tells Fortune that being regulated is a priority: “Bitreserve has an extensive and comprehensive licensing strategy for all 50 states in the U.S., including New York.” Coinsetter, which does much of its business in Canada thanks to acquiring Cavirtex last year, is staying. Gemini, a planned exchange from Cameron and Tyler Winklevoss, who already run a bitcoin pricing index and have invested in a slew of bitcoin companies, is staying; the twins have made it clear they are in no hurry to launch their exchange until it is fully licensed. (Coinbase, a leading exchange that has investment from the NYSE, launched without a BitLicense.)

In total, 22 companies have applied for a BitLicense thus far. As for the blowback from the companies that refused, a spokesperson for the NYDFS told Fortune, “There are always going to be those who argue for little-to-no regulation, but we think that ultimately the BitLicense is going to a be a positive for the long-term health of this industry. If digital currency is going to gain wider adoption, strong consumer protections and oversight (to help ensure that customer money doesn’t fall into a black hole) will be critical.”

What to expect next

For now, no one knows quite what level of action—how quickly or how severe—the NY Department of Financial Services will take against companies that continue to operate in New York without a BitLicense. That means it is possible we may see a bitcoin startup that did not apply nonetheless attempt to maintain service in the state.

Having a BitLicense may even end up being seen as a “nice to have,” but not crucial. Think of it as a building being LEED-certified, bearing the seal that shows it is eco-friendly. Lukasiewicz likes that analogy. But he believes that any company with customers in New York that didn’t apply is taking a big risk. After all, the industry watched closely the prosecution, in Manhattan, of Silk Road mastermind Ross Ulbricht.

“I do think the biggest story in bitcoin in the next year,” Lukasiewicz says, “will be watching the NYDFS and seeing what develops next.”

This story was updated to include a comment from the NY Department of Financial Services; it also originally stated, in error, that Xapo was one of the companies leaving New York.

Former bitcoin cop won’t help bitcoin companies get licensed

When Benjamin Lawsky announced in May that he would step down as New York State’s chief of digital-currency regulation to go into private practice, some people in the bitcoin world rejoiced. Others cried foul.

Overseeing the regulation of digital-currency businesses was just one part of Lawsky’s job as the first superintendent of the state’s Department of Financial Services, created in 2011. But that task became, in the past year, the bulk of the story for Lawsky as he proposed, revised, and finally introduced the first state regulatory policy on digital-currency companies deemed “money-transmitters.” He called it the BitLicense.

The final product did not go over well. Many bitcoin policy pundits and bitcoin startup executives took issue with what they felt was an overreaching set of requirements to get the necessary license. Companies reacted in different ways: Coinbase launched a bitcoin exchange in January that had investment from the New York Stock Exchange, but it is not licensed under BitLicense; Gemini, a forthcoming bitcoin exchange from Cameron and Tyler Winklevoss, has not yet launched because, as the brothers have said, they are waiting until they obtain a license; ShapeShift.io, a site for converting bitcoin to other currencies, shut down service in New York in protest to BitLicense.

At the end of June, with the controversial set of rules as his most recent legacy, Lawsky left office. (His chief of staff Anthony Albanese will serve as acting superintendent for the time being.) The New York Timesreported that Lawsky planned to lecture at Stanford University and open his own firm in New York: “He will provide compliance and risk management advice to a range of companies grappling with data breaches and other technological challenges. His clients are likely to include technology companies.”

That sounded, to some, as though Lawsky was planning to leave office, then turn around and consult with startups (likely for big fees) on how to navigate the very rules that he created.

He registered The Lawsky Group in Delaware on June 17, the day after he left office. Bitcoin.com promptly published a passionate piece called “Ben Lawsky’s revolving door” in which it argued, “Lawsky is adding insult to injury by injecting a layer of cronyism into an already depressing regulatory landscape in New York… Lawsky is offering advice on how to deal with the burden that he created. The moral implications of such an action are undoubtedly questionable… Lawsky is making Bitcoin businesses worse off for his own personal gain… With this new consulting firm, the possibility of a cronyist and elitist Bitcoin economy in New York is much more likely to come to fruition.” Others had their say on Twitter:

Why would the goings-on at the NYDFS matter to those in the business world? Well, if you believe bitcoin entrepreneurs and enthusiasts who insist that their companies have the potential to change banking (and other industries) forever, then the next NYDFS superintendent has a tall task: play watchdog to these startups without limiting their ability to innovate.

Last week, the man who the Times called the “Sheriff of Wall Street” and others called a “bitcoin cop” (Lawsky told Bloomberg last year of his intent to “police Bitcoin”) at last responded to the accusations.

At American Banker‘s digital currencies conference in New York, the magazine’s editor Marc Hochstein asked Lawsky about whether his new firm represented a potential conflict of interest. “What would you say to someone,” Hochstein asked, “who would think that maybe you built yourself a revolving door?”

“I can’t work on anything, for life, I ever worked on [at the NYDFS],” he said, as quoted by Reuters and Coindesk. “I’m doing no work in the virtual currency space,” he added. But the killer sound bite, for those in the bitcoin world, was this:

“If anyone said, ‘I want to hire you to help me get a BitLicense… no can do.”

The statement will not do much to quell critics. On its web site, the Lawsky Group says it “provides in-depth counsel and strategic advice on financial services regulation, cybersecurity and cyber-risk, new financial technologies, compliance, consumer protection, privacy, anti-money laundering controls, crisis management, and investigations in the banking, insurance and other related industries.” Some in the bitcoin community may feel that any work with digital-currency clients at all is a conflict of interest. But for now, Lawsky has at least made it clear he cannot, and will not, work with companies on BitLicense.

For those in the bitcoin world fearing regulation, the focus will soon shift to the next Benjamin Lawsky, whether that be current acting superintendent Albanese or some other authority. It does not appear to be an easy job.

Bitcoin company ditches New York, blaming new regulations

It’s been barely a week since the BitLicense was released, and it has already driven a bitcoin startup out of New York.

ShapeShift.io, a bitcoin startup that allows people to quickly exchange digital currencies without an account or arduous signup process, has completely cut off service to New York in response to the state’s new regulatory policy for digital currency businesses. The BitLicense, which was finalized last week, sparked fear among the bitcoin community during its revision process over the past year, and now that it is out, has courted criticism for the various licenses and approvals it requires of companies that store and transmit money for customers. It is seen as too stringent and restrictive of innovation.

The BitLicense backlash began last week with official statements and responses from bitcoin startup executives as well as policy pundits. ShapeShift is the first business to promptly ‘get out of dodge’ in response to the policy. (Bitcoin wallet provider Xapo moved its headquarters to Switzerland last month, but stated that it was not out of fear of regulation.)

The company has suspended service to all users in New York State, and is redirecting its homepage for Internet visitors there to PleaseProtectConsumers.org, with a long note about the issue of identity theft and how bitcoin and the blockchain can prevent it.

A blunt passage toward the end of the text reads: “Bitcoin and blockchain technology have enabled a new standard of financial privacy and consumer protection… Unfortunately, in spite of the technological achievements that now protect consumers, some jurisdictions have legally mandated the continued extraction of sensitive private information.” Then it lists those jurisdictions; they are New York State and North Korea. That likely isn’t the company, in terms of privacy law, New York wants to keep. ShapeShift is inviting other digital currency companies to do the same: cut off service to New York and redirect its web site there to the PleaseProtectConsumers page.

It is quite a statement by a buzzy startup and a big name in the bitcoin community.

While Shapeshift has so far raised only a seed round of just under $1 million from Roger Ver (nicknamed “Bitcoin Jesus”) and Barry Silbert (founder of the Digital Currency Group), CEO Erik Voorhees is a widely followed voice in the digital currency world who founded Coinapult and worked at BitInstant. Vorhees founded ShapeShift and ran it using an alias at first until he came out as its CEO in March.

When the Bitlicense was announced last week, Voorhees tweeted that “California is winning.” ShapeShift investor Roger Ver, meanwhile, tweeted a longer screed:

“Since New York has mandated unethical and dangerous data collection of users, we have no choice but to suspend service to that territory,” Voorhees said in a strongly worded public statement on Thursday. “We hope other jurisdictions will be less reckless with the private information of their residents. Finally digital commerce can be safe—if only regulators would let it happen.”

The chief architect of the BitLicense, Benjamin Lawsky, superintendent of the NY Department of Financial Services, announced last month that he would step down from his post at the end of June. Before he went out the door, he found time to release his regulatory policy. Many in the bitcoin community are hoping his yet-to-be-named successor might later come up with a friendlier one.

As for ShapeShift’s big move, the NYDFS had this to say, in a statement sent to Fortune: “We always recognized that there is going to be some part of this community that is against even pretty standard financial regulatory oversight measures, such as anti-money laundering controls and other consumer protections. That said, one digital currency company has already received a license from NYDFS and a number of others have stated they intend to seek BitLicenses shortly. Ultimately, we believe that prudent regulation will be important to building greater consumer confidence in digital currency and sparking wider adoption.”

What Bitcoin consolidation in Mexico tells us about the industry

It’s a small deal that is a sign of a larger trend: Mexican bitcoin exchange Bitso has acquired another, smaller Mexican bitcoin exchange, Unisend. The value of the deal has not been shared.

Bitso, the larger of the two parties, is still a very small operation. As bitcoin news site Coindesk reports, Bitso’s trading volume in the last 24 hours amounted to 33.4 BTC—less than $10,000 worth of bitcoin—which is less than 1% the size of the leading U.S. bitcoin exchange, Coinbase.

So why is this important? Bitso buying Unisend is an effort to achieve scale in the burgeoning bitcoin market in Mexico. It is also a sign of further consolidation among bitcoin exchanges, which began cropping up across the world in the last two years. (For example Coinbase, which grabbed an investment from the New York Stock Exchange, got a considerable deal of attention when it launched.)

In the past year, a U.S. bitcoin exchange, Coinsetter, bought out Canadian exchange Cavirtex; another Canadian exchange, Vault of Satoshi, shut down; an Indian exchange, BTCXIndia, shut down; and now this Mexico merger.

When Coinsetter announced its acquisition of Cavirtex in April, Coinsetter CEO Jaron Lukasiewicz told Fortune, “We expect to do and see more of this. I look at this as the beginning of a broader consolidation of the space.” He may have been precisely right.

Bitso CEO Pablo Gonzalez echoed the sentiment, telling Coindesk today, “Consolidation makes sense at this point, in preparation for the huge potential that we see coming with remittance partners poised to begin activity over the bitcoin rail.”

New York’s bitcoin business policy has arrived

What is that, you ask? Something a bit less sexy than its flashy name suggests: it’s the set of regulations that will govern digital currency businesses operating in New York State. The much-ballyhooed bitcoin law, developed and revised by the New York Department of Financial Services and its superintendent Benjamin Lawsky over the last year, was made official on Wednesday. It has also been the cause for much consternation in the bitcoin community.

Executives, policy pundits, and investors have been concerned that BitLicense would stifle innovation at startups. At a bitcoin breakfast event in Manhattan in April, a group of them traded complaints (“They ended up with a pound of soup where they threw in all the different bank rules and AML [anti-money laundering] rules… they ended up with something very salty,” said Tim Byun of BitPay) and hyperbolic predictions (if BitLicense is too stringent, New York City will “lose the next Wall Street” to Silicon Valley, Estonia, or North Carolina, said Fred Wilson of Union Square Ventures).

When Lawsky suddenly announced last month that he would resign his post in June to go into private practice in California, the bitcoin community rejoiced. “Ding Dong, Lawsky’s gone,” tweeted Anthony di Lorio. Sal Delle Palme tweeted, “Ciao, Lawsky!” And Times reporter Jenny Anderson observed there would be “champagne corks popping” at banks as a result.

But now that Lawsky’s law is here, the celebration is over—and the critics are speaking out.

What are bitcoin folks most upset about? They see the final policy, which requires licenses from business that hold and transmit money on behalf of customers, as being overly restrictive. They resent that BitLicense requires companies covered by the policy to get pre-approval for every new product rollout—which the companies think might be a slow process. They fear that new bitcoin startups that don’t yet have revenue will have to spend big money on legal fees and approval processes. They had hoped the final language would overtly exclude companies that offer a “multi-sig” product (a security approach involving the ownership of two separate private keys), since those companies don’t truly have full custody of a customer’s bitcoins. (The final product does not clearly exclude multi-sig entities; Ryan Selkis, director of investments at the Digital Currency Group, called this an “inexcusable oversight.”) And they worry that, since BitLicense is the first designated set of regulations for bitcoin businesses from a single state, other states will now follow New York’s example and use BitLicense as a template for their own regulatory policy.

In a statement, the well-funded startup Coinbase responded publicly: “We remain concerned over specific components of the BitLicense that were left unchanged, including state-specific AML rules that are inconsistent with federal guidelines. Moreover, it’s troubling that this nascent industry is being subjected to more onerous regulations than those typically applied to legacy financial institutions.” The nonprofit policy advocate Coin Center, meanwhile, posted a handy tracker that compares digital currency policies across different states to that of New York.

Many in the bitcoin community have railed that BitLicense will cause the city to lose bitcoin startups to the looser regulatory pastures of Europe or states like North Carolina, which has been praised for its friendliness toward digital currency businesses. There is an effort underway in the New Jersey legislature to propose tax cuts for bitcoin businesses. Such a move would incentivize digital currency startups to move their headquarters to New Jersey. (Indeed, some companies, like the digital wallet provider Xapo, have already fled New York—Xapo moved its global headquarters to Zurich last month.) Matt Odell, co-founder of a bitcoin informational site, Coinprices.io, said in an email blast that BitLicense, as it stands now, “will stifle innovation in New York as bitcoin businesses move to friendlier locales.” He called parts of it “draconian” and said, “much of it is too vague to give bitcoin companies the certainty that they are indeed complying with the law.”

Not everyone was unhappy with the new policy. Jeremy Allaire, CEO of one of the hottest bitcoin companies, Circle, told the bitcoin news site Coindesk, “Would I welcome lighter touch? Sure, but I think it’s an important stake in the ground.” He added that the policy is clear and straightforward for his company, but “for others, not so much.”

In just a few weeks, the hue and cry from these boisterous bitcoiners will move off of Benjamin Lawsky and on to the shoulders of his yet-to-be-announced successor.

There’s big pressure on New York’s bitcoin regulation plan

It’s an apt choice of name for a regulatory framework that will govern an industry whose players have included BitPay, BitGo, BitAccess, BitPagos, BitInstant, and BitWall. Companies like those, and others in the bitcoin community (and beyond bitcoin), anxiously await the final version of the policy that Benjamin Lawsky, superintendent of the New York Department of Financial Services, has spent nearly a year revising.

The policy will require digital currency companies to obtain a license in order to transmit money on behalf of customers. (Former BitInstant CEO Charlie Shrem went to prison last month for operating an unlicensed money-transmitting service, among other charges.) New York will be the first state to roll out such a policy, but broad bitcoin regulation has a long way to go in the U.S., where 48 different states have their own set of money-transmitting regulations.

“I think a lot of people are scared, because when you’re a company and you’re looking for VC funding, you worry about your bottom line and you worry about whether you’ll be allowed to do what you want to do,” says Peter Van Valkenburgh, research director for the nonprofit industry-watchdog Coin Center. “Regulation is something you worry about.”

Coin Center is one entity that recently submitted an official “comment” to the NYDFS with suggested changes to the current version of BitLicense. The NYDFS first proposed an initial draft in mid-2014. Since then, it has twice gone through the cycle of open comment period, review, and revision. “We absolutely look at the comments,” a spokesperson from Lawsky’s office tells Fortune. “We review them with the aim of putting out a final regulation that makes sense for everyone. Our hope is that it will be done by the end of May.”

In its comment, Coin Center acknowledged that the most recent iteration of BitLicense, from February, “takes into account many of the changes that we and others in the Bitcoin space suggested,” and said, “We appreciate this good faith effort.” But Coin Center still has concerns. Chief among them is the fear that if BitLicense too broadly defines which companies must be licensed, it runs the risk of restricting new startups. Among other points, Coin Center fears that, “vague definitions could require licensing for businesses which were never intended to be covered by the BitLicense,” and that the current language requiring licensees to get pre-approval from NYDFS for new products will create a “bottleneck on innovation which will hurt New York businesses attempting to compete in a fast paced global marketplace.” The strongest-worded of Coin Center’s points is that BitLicense’s AML (anti-money laundering) guidelines “go too far.”

For the most part, Coin Center’s comment is relatively tame and respectful. Others in the community are reportedly not so civil toward the plan, and don’t feel as kindly toward Lawsky, who some insiders say is using BitLicense as a platform to advance his own name.

“I’m not of the school that believes this is all a play to try and brutally shut down the viability of bitcoin because of some, I don’t know, conspiracy with banks and other entities with vested interest,” says van Valkenburgh. “I don’t think that at all. Some do. The second draft is a difficult law to comply with, but if we got the changes that we asked for, in many ways we’d be looking at a law that could help startups get clarity, help them know they’re not going to be swept into a broad and onerous regulatory law.”

Last August, after the release of the very first BitLicense draft proposal, bitcoin news site Coindesk asked 14 prominent people in bitcoin their take on the policy, and found “a unanimous opinion that the proposals presented by Lawsky and NYDFS are overly broad and restrictive, and could have a deleterious effect.”

There’s even a Change.org petition against the current BitLicense proposal. Adam Draper, founder of Boost VC, created the petition, which has nearly 9,500 signatures at the time of writing, to make two central complaints: “The rules would require some businesses to obtain two licenses for the same business, creating an expensive and burdensome environment,” and, “The rules don’t include a significantly flexible on-ramp for small startups to build and innovate their products, killing potentially disruptive technology before it can even start.”

Bitcoin supporters are split when it comes to regulation. While some welcome it (such as those rolling out insured exchanges) because it can bring the currency and the technology mainstream, many are more philosophically motivated, and were attracted to the space precisely because of its lack of regulation. The latter camp includes people like Roger Ver, nicknamed “Bitcoin Jesus,” who recently told Fortune, “Bernie Madoff… was regulated up and down and every which way, and it didn’t do any good, he ran away with everyone’s money… Without all the regulations, we could do so much more already.”

Coin Center’s van Valkenburgh, despite his concerns about BitLicense, says that the guidelines will bring “a certain amount of legitimacy.” He adds, “I think there are some people who want it both ways, and I really don’t understand their world view. Either we’re going to exist in a stateless society and have this utopian, unregulated money, or we’ll continue to exist in a governed society and have regulations, and the best we can do is hope that these regulations do not make it impossible to innovate.”

At a speech at the Bipartisan Policy Center in Washington, last December, Lawsky described his challenge in plain terms: “Come up with appropriate guardrails that help protect consumers and root out money laundering… while at the same time not stifling beneficial innovation in a fledgling industry.”

The industry is concerned enough about BitLicense that on Friday MIT Media Lab will moderate a “State of the BitLicense Roundtable” event in Manhattan, with panelists like Fred Wilson of Union Square Ventures and executives from bitcoin companies such as Coinbase, BitPay, Circle, and Xapo. According to press materials, the speakers will address questions like, “What are the most serious issues with the current NYDFS BitLicense proposal? Why is it crucial for industry to act, and why is now the time to do it? If the BitLicense were to be finalized in its current form, what consequences would you expect to see? What repercussions would it have on innovation across the industry?”

Lawsky, for his part, has suggested that he is willing to be flexible. “We’re going to see how this all shakes out,” he said last week at a Dow Jones Risk & Compliance symposium in New York. “I think there’s room for federalism, but at the same time if you have a whole series of different rules and it becomes a crazy quilt patchwork, that can get hard to comply with.”

N.Y. proposes the first regulatory system for virtual currency exchanges

New York’s financial services department has proposed the first regulatory framework for policing virtual currency businesses.

Under the proposed rules, any New York businesses that store or exchange virtual currencies, such as Bitcoin, would first need to obtain a license from the state, Benjamin Lawsky, the state’s financial services superintendent, said Thursday. Lawsky says the so-called “BitLicense” would be meant to protect consumers who deal with virtual currency exchanges without slowing down innovation by those businesses.

“We have sought to strike an appropriate balance that helps protect consumers and root out illegal activity – without stifling beneficial innovation,” Lawsky said in a statement. “Setting up common sense rules of the road is vital to the long-term future of the virtual currency industry, as well as the safety and soundness of customer assets.”

Licensed virtual currency firms would be required under the proposed rules to hold the same amount of virtual currency that they owe to customers without selling or loaning it out to anyone else.

The proposed guidelines would also mostly eliminate virtual currency users’ ability to remain anonymous, as all licensed businesses will need to maintain and submit records of virtual currency transactions that include all parties’ names and addresses. That particular wrinkle is part of the state’s compliance program meant to stamp out the use of virtual currency for money laundering.

The state, which said earlier this year that it would come out with these guidelines by the end of the year’s second quarter, has submitted the proposal for public comment. The full framework will be published for public view on July 23 and will remain open for comment for 45 days from that point, Lawsky said.